Apple is dominating the mobile phone industry, despite only holding a tiny …

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Despite being a young upstart in the mobile phone market and only grabbing about 2 percent of the worldwide market share for mobile handsets, Apple has surpassed long-time market leader Nokia to become the most profitable handset maker on the planet. According to Strategy Analytics, Apple's operating profit in the third quarter of this year hit the $1.6 billion mark, while Nokia topped out at $1.1 billion. The accomplishment is rather significant given that Apple entered the market just over two years ago.

Two factors contributed to Apple's move into this spot. One is the overall decline in mobile phone sales while sales of smartphones continue to climb. The other factor is Apple's penchant for healthy profit margins. "With strong volumes, high wholesale prices, and tight cost controls, [Apple] has successfully broken into the mobile phone market in just two years," wrote Strategy Analytics analyst Alexander Spektor.

The iPhone essentially redefined the market for smartphones, and has been building a strong first-mover momentum for advanced mobile devices while other handset makers attempt to mimic Apple's success with their own touchscreen phones, new mobile operating systems, and app stores for distributing applications. Meanwhile, Nokia, though retaining a lead in unit sales for both mobile handsets in general and smartphones in particular, has seen sales drop, is still struggling with the process of open-sourcing its Symbian OS, and had issues with component supplies and pricing.

Apple's strategy in the mobile market is quite similar to its strategy in the overall PC market. While the company has roughly 4 percent of worldwide PC sales with revenues that are significantly lower than rivals Dell and HP, its net income beats Dell and isn't far from HP. In other words, Apple's strategy boils down to working smarter, not harder.

This low-volume, high-margin approach is the same one that Apple used with the iPhone. However, the blend of style, ease of use, and well-stocked App Store drove the iPhone to push its profits beyond those even of Nokia. Apple may not ever become the number one mobile handset maker, and we don't think it would mind—Apple has for years seemed content to simply be highly profitable.